Current Affairs - 26 December 2015

General Affairs 

PM Narendra Modi's Surprise Visit To Lahore A 'Welcome Move', Says CPI

• NEW DELHI:  CPI today welcomed Prime Minister Narendra Modi's decision to visit Lahore to meet his Pakistani counterpart Nawaz Sharif, saying it would help take forward the India-Pak dialogue process.
  
  "There have been many strains in our relationship. The ice was finally broken by the NSA-level talks and the visit of External Affairs Minister Sushma Swaraj to Pakistan. Now that process is being followed up by Modi's visit," CPI National Secretary D Raja said.
  
  Noting that this was Prime Minister Modi's first visit to Pakistan, he said it would help arrive at a better understanding and strengthen mutual trust so that the dialogue process can be taken forward.
  
  

  "Dialogue is the only alternative to improve good neighbourly relations and sort out all problems bilaterally," Mr Raja said, adding it is "a welcome move" even though the visit to Pakistan was not mentioned in Parliament and has come as a "surprise".

Arvind Kejriwal Attacks Lt Governor, Says He Is 'Saving His Political Bosses'

• NEW DELHI:  Delhi Chief Minister Arvind Kejriwal lashed out at Lieutenant Governer Najeeb Jung on Friday, reacting sharply to reports that Mr Jung has questioned the validity of the Inquiry Commission notified by the AAP government to probe financial irregularities in the Delhi cricket body, DDCA.
  
  Mr Kejriwal said the LG is trying to protect his political bosses. He was speaking at a Delhi government function. "The LG's boss is Jaitley sahb and he is trying to save him," the chief minister said. This is not the first time Mr Kejriwal has accused the LG of acting at the Centre's behest.
  
  Finance Minister Arun Jaitley, in a Facebook post on Thursday had criticised AAP for lowering the political discourse. "People in positions are expected to act with restraint.  They cannot be outlandish. Vulgarity is not a right available to them...Lumpenisation of public discourse can never be high point of politics," wrote Mr Jaitley.
  
  The government's probe is centred around AAP's allegations that Mr Jaitley, who was the DDCA chief for 13 years, is involved in the alleged corruption.
  
  Mr Jung has reportedly questioned the validity of the Inquiry commission. "In a communication to the Ministry of Home Affairs, the LG has stated that the Commission of Inquiry Act, 1952 empowers only the Centre and state governments to appoint a commission of inquiry. Since, Delhi is a Union Territory, a commission of inquiry may be ordered only with the concurrence of the Centre, through the LG," sources said, news agency Press Trust of India reported.
  
  "Also, the funding for the DDCA comes not only from Delhi but also other states and hence it is not just Delhi Government's jurisdiction to conduct a probe," they added.
  
  Countering Mr Kejriwal's fresh verbal attack, BJP Spokesperson Nalin Kohli, said, "It is strange that AAP takes decision on those issues only which have clashes." He said the AAP government wants to create an impression that the Centre is not letting it function. "Kejriwal has a habit of making allegations about everyone."

'Shocked' By PM Modi's Surprise Visit To Lahore, Says JD(U)

• NEW DELHI:  As Prime Minister Narendra Modi heads to Lahore on a surprise visit, Janata Dal (United) (JD-U) said it was "stunned" by the decision, especially in the wake of violations by the neighbouring country on the border, including the beheading of an Indian soldier.
  
  The party said that "friendship and betrayal cannot go hand in hand" as it reacted sharply to the surprise announcement by Prime Minister Modi as he prepared to wind up his brief visit to Afghanistan today.
  
  "I am stunned and shocked. At this moment, I can think of beheaded Hemraj," said JD(U) leader KC Tyagi.
  
  

  Lance Naik Hemraj was killed and beheaded by Pakistani soldiers on January 8 last year in the Poonch sector of Jammu and Kashmir.
  
  Mr Tyagi said "nothing is going to improve unless the leaders of Pakistan change their mindset. Pakistan should know that friendship with India on one hand and betrayal on the other cannot go together."
  
  The ties between India and Pakistan have witnessed some positive developments after a chill of several months. The two countries recently decided to launch a comprehensive dialogue after Prime Minister Modi and his Pakistani counterpart Nawaz Sharif met in Paris recently.

Terrorism, Narcotics Serious Challenges: India-Afghanistan Joint Statement

• KABUL:  Afghanistan needs to eliminate terrorism perpetrated from "sanctuaries and safe havens" for peace, India and Afghanistan said today identifying terrorism, narcotics and extremism as "serious challenges".
  
  A joint statement, released after a meeting between Prime Minister Narendra Modi and Afghan President Mohammad Ashraf Ghani, also "strongly condemned" terror incidents in Afghanistan.
  
  The statement said the two sides "exchanged views on the security situation in Afghanistan, which faces serious challenges of terrorism, extremism and narcotics".
  
  "Strongly condemning the barbaric incidents of terrorism in Afghanistan in recent months, the two leaders reiterated that peace in Afghanistan required elimination of terrorism perpetrated and supported from sanctuaries and safe havens," the statement said.
  
  Mr Modi, meanwhile "reiterated India's full support to Afghanistan for strengthening its defensive capabilities for preserving Afghanistan's unity and territorial integrity and ensuring security".
  
  Mr Modi and Mr Ghani also agreed that those perpetrating violence cannot be allowed to wield influence over any part of the mountain nation.
  
  "...Groups and individuals that perpetrate violence on the people of Afghanistan and challenge by use of violence and terror against the government of Afghanistan cannot be allowed to exercise control or wield influence over any part of Afghanistan's territory in any manner whatsoever, as that would pose serious risks to the gains of the last nearly one and half decades, and renew those very threats against which the people of Afghanistan and international community had resolutely fought and made great sacrifices," said the statement.
  
  Mr Modi supported the Afghan government's reconciliation process, and said the groups and individuals to be reconciled must give up violence and abide by the constitution of Afghanistan.
  
  The Mi-25 choppers India is giving to Afghanistan were also mentioned in the statement, and both sides agreed to expand training opportunities for Afghan security and defence forces.
  
  "...The two leaders pointed out that the Mi-25 helicopters provided by the Indian government to Afghanistan and their maintenance facility would address an important requirement".
  
  India has already delivered the first of four planned Mi-25 attack helicopters for use by the Afghan Air Force.
  
  "They agreed to increase and expand training opportunities for Afghan National Security and Defence Forces in relevant Indian institutions, based on the requirements of Afghanistan," the statement said.
  
  Mr Modi also thanked Afghan authorities for ensuring the safety of the Indian embassy in Kabul, the four consulates in Jalalabad, Kandahar, Herat and Mazar-e-Sharif, and Indian nationals in Afghanistan, including those working on various development projects.

Environmental Pollution Too Behind Antibiotic Resistance?

• WASHINGTON:  Environmental contaminants may be partly to blame for the rise in antibiotic-resistant bacteria, a new US study suggests.
  
  J Vaun McArthur from the University of Georgia tested his hypothesis in streams on the US Department of Energy's Savannah River Site (SRS).
  
  The 802-square km site near Aiken, South Carolina, east of the Savannah River, was closed to the public in the early 1950s to produce materials used in nuclear weapons.
  
  

  This production led to legacy waste, or contamination, in limited areas of the site. This waste impacted some of the streams in the industrial areas.
  
  "The streams have not had inputs from wastewater, so we know the observed patterns are from something other than antibiotics," said Mr. McArthur, a senior research ecologist with the Savannah River Ecology Laboratory and Odum School of Ecology.
  
  McArthur tested five antibiotics on 427 strains of E coli bacteria in the streams. His research team collected samples from 11 locations in nine streams, which included sediment as well as water samples.
  
  The level of metal contamination among these locations varied from little to high.
  
  The results showed high levels of antibiotic resistance in eight of the 11 water samples. The highest levels were found at the northern location of Upper Three Runs Creek, where the stream system enters the site, and on two tributaries located in the industrial area, U4 and U8.
  
  The level of antibiotic resistance was high in both water and sediment samples from these streams.
  
  McArthur said Upper Three Runs Creek flows through residential, agricultural and industrial areas before it enters the SRS, so the bacteria in this stream have been exposed to antibiotics.
  
  In contrast, U4 and U8 are completely contained within the site and have no known input from antibiotics. However, they have a long history of inputs from the legacy waste.
  
  McArthur conducted a second screening using 23 antibiotics on U4, U8 and U10, a nearby stream with little to no industrial impact.
  
  "More than 95 per cent of the bacteria samples from these streams were resistant to 10 or more of the 23 antibiotics," Mr. McArthur said.
  
  These included front-line antibiotics - gatifloxacin and ciprofloxacin, which are used to treat basic bacterial infections from pink eye to urinary tract and sinus infections.
  
  The contaminated streams U4 and U8 had the highest level of antibiotic resistance.
  
  "These streams have no source of antibiotic input, thus the only explanation for the high level of antibiotic resistance is the environmental contaminants in these streams - the metals, including cadmium and mercury,"Mr. McArthur said.
  
  The study was published in the journal Environmental Microbiology.

Business Affairs 

Board approves sale of Chola MS stake for Rs 883 crore

• The Board of Murugappa Group company Tube Investments has approved sale of 14 per cent stake in Cholamandalam MS General Insurance for Rs 882.68 crore to its Japanese JV partner, Mitsui Sumitomo Insurance Company.

  "The Board of Directors (of Tube Investments) at its meeting held today has approved the sale of 14 per cent shareholding in Cholamandalam MS General Insurance to Mitsui Sumitomo Insurance for a consideration of Rs 882.67 crore," the city-based company said in a statement.

  The transaction is subject to necessary "regulatory approvals".

  Currently, Mitsui Sumitomo Insurance holds 26 per cent stake in Chola MS, and with the additional 14 per cent, it goes up to 40 per cent.

  "I am delighted that MSI is increasing its stake in Chola MS to 40 per cent," said Tube Investments chairman M M Murugappan.

  "This will further strengthen our relationship with MSI and help realise our vision in making Chola MS the most respected general insurer in India."

  Mitsui Sumitomo Insurance Company MD and CEO, Karasawa said: "We are very pleased that the Murugappa Group accepted our offer to increase our stake in Chola MS."

  He added: "We will cooperate with Murugappa to increase the value of Chola MS through this transaction and provide further safety and security to customers in India." 

Will realty sector slowdown continue in 2016?

• With huge inventory piling up across the country, the road to recovery looks long and winding for the real estate sector.

  According to experts, it will take another five years to sell the 7 lakh units, but lack of buyers' interest will make it more and more difficult for developers to complete existing projects.

  Even the festive season and the recent round of rate cuts by the Reserve Bank of India (RBI) have failed to bring cheer to the real estate market. Lack of a regulator and delayed reforms have also prompted people to stay away from real estate.

  Property prices have remained stagnated. According to real estate consultancy firm JLL, in the last four quarters, prices in Mumbai and Chennai increased by 3.7 per cent and 1.5 per cent respectively while in Delhi-NCR, prices remained flat-and the trend is likely to continue.

  Though the situation is expected to improve this New Year, experts say it won't be as good as 2010-2012, and will take a few more years for the sector to revive.

  Here is a lowdown on how the real estate sector is expected to perform in 2016.
  
  PRICE OUTLOOK

  Those who are looking at quick profits should not invest in properties because realty prices are not expected to rise sharply.

  Says Anuj Puri, chairman and country head, JLL India, "Though many buyers have been waiting for real estate prices to correct, it is unlikely that any large-scale 'shock disruption' is imminent."

  Expectations were high that after the new government comes to power, a new lease of life would be infused into the sector but nothing has happened so far. Sanjay Dutt, managing director, Cushman and Wakefield India agrees, "While we expect a status quo during 2016, the impact of these developments will gradually set in towards the end of 2017 or early 2018." However, unlike the residential market, commercial projects  are showing signs of revival.

  NEW LAUNCHES 
  Now that investors are preferring financial assets over physical assets, developers have cut down on new projects. Moreover, end users have not been buying properties feeling let down by the developers.

  Stretched deadlines for completion of projects has shooed buyers away from the market. The trend is expected to continue in 2016. According to a recent Knight Frank report, new project launches in NCR stood at 11,360 units in the first half of 2015 registering a massive 68-per cent drop from the corresponding period in 2014.

  However, several steps have been taken to make real estate more affordable. According to experts, many new housing projects have been launched at lower rates compared to similar projects launched in the same location. The Knight Frank report says residential projects under the Haryana government's affordable Housing Policy 2013 contributed significantly to the new launches in NCR between January and June 2015. Approximately, 43 per cent of the total new launches fall under the scheme.
  
  UNSOLD INVENTORY

  Unsold inventory is a key indicator for the real estate sector. Rising levels of inventory indicate the lack of demand in the market.

  Says Dhruv Agarwala, chief executive officer, PropTiger and Makaan.com, "Unsold inventory had reached very high levels in the beginning of 2015. It has come down slightly in the past two quarters due to a slowdown in new launches. We expect it to come down further as new launches will continue to go down and developers will focus on liquidating the existing inventory."

  Lack of buyers' interest has also impacted property prices, which either remained stagnant or declined across all major cities. According to a research report from PropTiger, in the first quarter of 2015-16, property sales fell by 18 per cent across Ahmedabad, Bangalore, Chennai, Gurgaon, Hyderabad, Kolkata, Mumbai, Noida and Pune.

  POSITIVE SIGNALS

  Regulator: The real estate market lacks regulation, transparency and systematic process. A regulator for the sector will help buyers and investors to rebuild their faith on builders and developers.

  Online buying: Developers have realised the potential of online medium in terms of reaching out to people.

  Says Agarwala: "Although these are early days in India for home transactions on the digital platform, I believe it will grow. Portals will come out with newer features and solutions that would provide easy access to every potential customer directly on his or her smartphone."

  Recently, Tata Value Homes tied up with mobile payments network MobiKwik to allow payments for home bookings. Tata Value Homes has already sold 2,000 homes online through digital platforms, including Facebook, Snapdeal, and housing.com.

  Interest rate cut: Experts say the RBI may cut interest rates further and this could trigger demand in tier-II and tier-III cities. The RBI has cut the repo rate by 125 basis points (bps). Banks have, however, been slow in passing on the benefit of the rate cut to customers reducing home loan rates by only 30 to 35 basis points. Therefore, it may not be a good idea to invest in real estate in 2016. For end users, however, it is certainly the right time. But, before you take the plunge, don't forget to bargain for your dream home.

Gold price recovers on scattered jewellers buying

• Snapping the two-day losing streak, gold prices rebounded by Rs 125 to Rs 25,675 per 10 grams at the bullion market on Friday on scattered buying by jewellers and retailers.

  Silver also edged higher by Rs 25 to Rs 34,325 per kg on increased offtake by industrial units and coin makers.

  Traders attributed the recovery in gold prices to some buying by jewellers as well as retailers.

  In the national capital, gold of 99.9 per cent and 99.5 per cent purity recovered by Rs 125 each to Rs 25,675 and Rs 25,525 per 10 grams, respectively. It had lost Rs 200 in last two days.

  The sovereign, however, remained flat at Rs 22,200 per piece of eight grams in limited deals.

  Silver ready inched up by Rs 25 to Rs 34,325 per kg, while weekly-based delivery shed Rs 35 at Rs 34,345 per kg.

  On the other hand, silver coins continued to be traded at last level of Rs 48,000 for buying and Rs 49,000 for selling of 100 pieces.

Forex reserves down by $1.4 bn at $351.11 billion

• After rising for two consecutive weeks, country's foreign exchange reserves fell by $1.4 billion to $351.106 billion in the week to December 18 on account of fall in foreign currency assets (FCAs), according to an RBI data.

  In the previous week, reserves had increased by $407.9 million to $352.51 billion.

  FCAs, a major component of overall reserves, declined by $1.368 billion to $328.27 billion in the reported period, RBI said in a release on Saturday.

  FCAs, expressed in dollar terms, include the effect of appreciation and depreciation of non-US currencies such as the euro, pound and the yen, held in the reserves.

  The gold reserves remained unchanged at $17.54 billion.

  India's special drawing rights with the International Monetary Fund fell by $24.3 million to $3.997 billion in the week, while country's reserve position with the Fund decreased by $7.8 million to $1.295 billion, the apex bank said.

The Tax Tangle

• India has seen a significant number of tax disputes between the government and the corporate sector in the recent past, many of which have made headlines. According to numbers from the Centre for Monitoring Indian Economy (CMIE), the total amount locked in tax disputes related to listed Indian companies was Rs 2,18,897 crore in the last financial year.

  This amount is startling if we compare it with the gross tax revenues of around Rs 4,90,618 crore during April-September 2014/15, accounting for 36 per cent of Budget estimates for the entire year. The aggregate number, taken out after looking at data of more than 2,000 listed companies, was 27.1 per cent higher than the 2013/14 figure, the sharpest rise since 2007.

  The overall magnitude of tax disputes in the Indian corporate sector is even higher. Arrears for customs and service tax were Rs 21,021 crore and Rs 83,112 crore, respectively, as on March 2015. Around 37,506 tax disputes were pending before income tax appellate tribunals with a financial implication of Rs 1,45,534.7 crore. The amounts locked in tax disputes before high courts and the Supreme Court were Rs 37,683.98 crore and Rs 4,654.5 crore, respectively. Around 3,296 corporate cases involved outstanding income tax of more than Rs 10 crore.

  

  One of the big reasons for the continuation of a number of these disputes is ambiguity in tax laws. "The chronic problem lies in the increasing pendency of disputes and lack of clarity in law," says Jiger Saiya, Tax Partner, BDO India.
  

  The rise in tax disputes is disturbing in light of the fact that it takes several years before a tax matter is resolved in the country. "In India, the success rate of the tax department is 10-15 per cent, whereas in jurisdictions like the UK, the figure is around 86 per cent," says Suresh Surana, Founder, RSM Astute Consulting.

  The disputes pertain to assessed tax liabilities for which the company has filed an appeal. They include income tax, excise, customs and sales tax cases. All companies are required to disclose the disputed tax liability as a contingent liability in their annual reports, according to Schedule III to the Companies Act, 2013.

  A majority of these disputes relate to income tax (over 40 per cent), followed by sales tax (around 20 per cent). A significant portion, more than 45 per cent, was accounted for by public sector undertakings (PSUs); here, sales tax was the major cause of disputes. The state-owned petroleum giant Oil and Natural Gas Corporation leads with over Rs 10,000 crore under tax disputes, followed by another PSU, GAIL India, which reported Rs 4,753.5 crore under disputes related to customs duty, excise duty and sales tax.

  

  The next in line were private sector companies and multinationals, which accounted for 37 per cent and 15 per cent, respectively, of the total money under dispute. For private companies, income tax accounted for a majority of disputes.
  

  Overall, companies in the oil and gas sector have the largest share, followed by metals and mining, and core sectors. "The large size of the oil and gas sector and specific accounting guidance based on international accounting standards, the IFRS, could have led to some major tax disputes," says Saiya of BDO.

  These disputed taxes are not debited from the company's account. "However, if the liability materialises, it can significantly impact the company's health," says Saiya.

  Given the several layers of complexity, there is no quick-fix solution to the problem. Surana says the implementation of voluntary tax litigation settlement scheme with a proper framework and guidelines can ensure speedy disposal of these cases. The finance minister, on his part, has also been pitching for a friendlier tax regime. Here's hoping that a suitable structure is soon evolved to address these disputes.

General Awareness

India to be the swiftly growing economy in next 10 years

• • The Centre for International Development (CID) atHarvard University has forecasted that India has the potential to be the world’s fastest growing economy gushing ahead of its South Asian economic rival China.

    • India has topped the global list with the growth rate projection at 7%.
    • On the other hand India’s contender China is expecting to face a continous slowdown to 3% growth annually to 2024.

    India’s efforts as growing economy

    • India has taken big paces in improving its productive capabilities; it hasdiversified its exports into more complex products including pharmaceuticals, vehicles and electronics.
    • India’s recent gains in complexity not only will drive higher incomes but also position it to lead global economic growth.

    The United Nations has also predicted that India will continue to be the fastest growing economy in the world in 2016 (7.3%) and 2017 (7.5%).

    Projection about Other Economies

    • South Asia and East Africa have the greatest potential for rapid growth while oil economies and other commodity-driven economies face the slowest growth outlook.
    • CID is bullish on East Africa with Uganda, Tanzania and Kenya ranking in thetop 10 with all predicted to grow at least 5% annually.
    • The growth forecast also looks favourable on Southeast Asia, wherePhilippines, Malaysia, Indonesia and Vietnam look to drive growth well above global averages.
    • The US is expected to grow at 8% annually to 2024, with higher growth predicted in the United Kingdom (3.2%) and Spain (3.4%).
    • There will be slow growth in Italy (1.8%) and Germany (0.35%).

    About Centre for International Development (CID)
    The CID at Harvard University is a university-wide centre that works to advance the understanding of development challenges and offer viable solutions to problems of global poverty. It also focus on resolving the dilemmas of public policy associated with generating stable, shared and sustainable prosperity in developing countries.

    • The CID researchers used their newly updated measure of economic complexity which captures the diversity and sophistication of productive capabilities embedded in a country’s exports to generate the growth projections.